ECB September rate hike a 'done deal,' market eyes December: Bloomberg

The European Central Bank is all but certain to raise its benchmark interest rate for the second time this year this week, Bloomberg reported Sunday (local time).

A further rate hike would reaffirm the ECB's standing as the most hawkish central bank among the G7, Bloomberg said.

With a rate increase this month widely treated as a foregone conclusion, market attention has already shifted to whether the ECB will raise rates again in December.

The key variables the ECB is watching most closely are the prolonged war in the Middle East and rising global oil prices. If the conflict continues to push energy prices higher, inflationary pressure in the eurozone could persist longer than expected.

Eurozone consumer prices rose 3.3 percent year-on-year in August, the highest reading in roughly three years and well above the ECB's 2 percent target.

For the US Federal Reserve, the consumer price index due next week is expected to weigh heavily on its rate decision, but the ECB has been clear about the need for preemptive tightening.

Solid economic growth would give the ECB additional grounds to press ahead with rate increases.

Forecasts on whether the ECB will raise rates again before year-end are likely to remain sharply divided.

Gediminas Simkus, governor of the Bank of Lithuania, has said a September hike alone would not be enough, while Joachim Nagel, the Bundesbank president generally regarded as hawkish, has been notably cautious about making any such comment.

Most economists expect this week's rate increase to be the last of the year. However, analysts at JPMorgan, Societe Generale and BNP Paribas have recently revised their outlooks to signal the possibility of another hike.